
arXiv: 2409.00296
Credit scores are critical for allocating consumer debt in the United States, yet little evidence is available on their performance. We benchmark a widely used credit score against a machine learning model of consumer default and find significant misclassification of borrowers, especially those with low scores. Our model improves predictive accuracy for young, low-income, and minority groups due to its superior performance with low quality data, resulting in a gain in standing for these populations. Our findings suggest that improving credit scoring performance could lead to more equitable access to credit.
FOS: Economics and business, FOS: Computer and information sciences, Computer Science - Machine Learning, Quantitative Finance - Computational Finance, General Economics (econ.GN), Risk Management (q-fin.RM), Computational Finance (q-fin.CP), Quantitative Finance - Risk Management, Economics - General Economics, Machine Learning (cs.LG)
FOS: Economics and business, FOS: Computer and information sciences, Computer Science - Machine Learning, Quantitative Finance - Computational Finance, General Economics (econ.GN), Risk Management (q-fin.RM), Computational Finance (q-fin.CP), Quantitative Finance - Risk Management, Economics - General Economics, Machine Learning (cs.LG)
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